Mar

9

 Getting Gold right is, in fact, harder than getting other (more widely-held markets) right. Over the short-term, Gold is always prone to un-calculable official verbal suasion, geo-political surprise or a gargantuan fund allocation/divestiture. One example is this morning's yet another newswirereport:

I'm a trader at heart. Trying to pinpoint near-term reversals is an exciting daily exercise for me. There is, however, a global crowd of Gold Bugs, and it's growing larger each day now, in 2011. Government actions around the world, U.S. included, generate more and more disappointment and rebellion. This rebellion slowly but surely translates into action on shareholders' behalf against each government's respective "stock certificate" - their currency. Not many global currency equivalents exist - thus Gold, and even "poor man's gold" Silver get a huge near-term shot in the arm. Precious metals bull run, in it's second decade now, appears invincible, and not subject to any upside cap - as the price scale is denominated in paper currency, which Gold Bugs assume trending to zero! Thus, more and more investors enter the space "for the long haul"; they condition themselves to be un-fazed by any near-term technical fluctuations. What gets missed in that type of investing is that, in speculative financial markets, long-term is the sequence of short-terms! Therefore, in my opinion, every long-term un-capped Bullish outlook errs in one assumption: that everything else will remain unchanged. Given that assumption, one can quite logically project that no paper price: $1500, $2000, $5000, $100000 is liable to cap Gold. Just like $147 Crude of 2008 was "surely" going to $250 according to many oil industry pundits - who assumed everything else static. But a single U.S. government action of moral suasion vis-a-visVitol

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caused trend reversal to down; then equity market contraction domino effect perpetuated new downtrend all the way to "unfathomable" lows in the $33 handle within the same year!

This example only serves to illustrate that even with Gold (let alone Silver) - there is still a possibility that any technical correction may prove more bigger for Gold Bugs than their ability to stay solvent. Thus, timing still has its place - even within this newly found religion.

So here is my current assessment of this arcane space: because of a protracted run-up without a significant correction, Longs are more dangerous at this point than Shorts. Speculators should be timing their Short entry, based on their chart feel, experience with "calendar" technical set-ups, inter-market indicators (i.e. clues from other leading markets), anticipation of news headlines and of likely reaction to news.

I venture and anticipate the following: despite Monday's classical intra-day reversal down from new highs - Bulls have not converted. They think: so what that Gold, Silver, Euro, Copper, Crude, Gasoline and Cotton all dropped from new highs - they didn't drop much, and are now appearing to retrace their losses. My opinion: the reason they didn't drop much by Tuesday - is because Monday's "Short play on gap-up to new highs" was soooo obvious - that too many short-term traders ventured in! It doesn't mean the idea of Shorting lofty levels to make a quick buck was wrong - it just wasn't destined to be the big trend-reversal trade. So there is good chance that all those Bull trends persist through Wednesday and even Thursday. Then Friday should prove a different story. And when the second downside reversal takes hold - do not bet that it will be as short-lived.

Most Gold and Silver traders will key off the Crude, Stocks, Bonds and Currencies for clues. I would certainly add Copper and Cotton to this smorgasbord. Not because of any fundamental connection - but rather because those two commodities have gained the most in the last year. Should they turn down, many will say it is because of the anticipated industrial demand slowdown. I say: it will be more because of major funds' decision to abort inflationary plays.

And when asked about the 2011 investment opportunity - I say Natural Gas. As an investor going in now for the long haul - at least you're assured that you're not buying into any current upside bubble in $3 handle vs. historic highs of over $15.
 


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